In-Picture | Sep 02,2024
Oromia Bank ended the last financial year looking less like a financial institution chasing scale and more like one restoring banking discipline. Yet the numbers tell a more measured story.
It was a year of earnings recovery, strengthened funding, improved liquidity, and a fortified balance sheet, without pushing lending aggressively. The Bank became more profitable, liquid, and resilient, for income growth outpaced expense growth by a wide margin, not because it stretched assets or leaned harder on leverage-sensitive lending.
In a financial system still adjusting to foreign exchange market reform, Oromia Bank’s results raised a question for the banking industry, whether balance-sheet expansion remains the right measure of success, or efficiency, income diversification, and liquidity discipline now matter more than raw loan growth.
According to Assefa Sema, the Board chairman, the results signalled stronger operational leverage and a more durable path to profitability. For the first time, he disclosed, the Bank had restructured its revenue and cost framework into a model in which revenue growth and profit before tax outpaced the rise in expenses.
“Our emphasis on prudent risk management, operational efficiency, and strategic agility has been critical,” Assefa stated. “It has allowed us not only to withstand volatility but to grow within it.”
Oromia Bank closed the year with net operating income of 8.49 billion Br, up from 6.34 billion Br, an increase of nearly 34pc. Total assets reached 85.5 billion Br. Deposits stood at 70.94 billion Br, while loans and Islamic financing were 45.38 billion Br.
Total income reached 12.3 billion Br, while total expenses increased 15pc to 9.79 billion Br. Assets expanded by 26.5pc, deposits increased about 26pc, loans grew only about four percent and profit before tax surged 155pc, which put Oromia Bank among the better performers in absolute terms, though still behind Abay and Addis in after-tax profit. Gross profit climbed to 2.57 billion Br from one billion Birr, while profit after tax grew to 1.99 billion Br from 840.9 million Br. Earnings per share increased to 297 Br from 142 Br. The Bank posted a headline return on equity of 38.5pc.
Teferi Mekonnen, the Bank’s president, attributed this performance to tighter cost control and stronger revenue growth. Oromia Bank cut its permanent workforce by 10pc and reduced its branch network by five percent.
“We introduced a huge branch expansion to the industry,” Teferi told Fortune. “Now we are backing down.”
He argued that branches would continue to shrink in the digital era and insisted the reduction in staff had not affected the Bank’s deposit-per-capita performance.
“We carried out major surgery to fix problems that had been lingering for the past decade,” Teferi told Fortune.
The Bank posted a return on assets (ROA) of 3.35pc and a return on equity (ROE) of 38.46pc, signalling an equity multiplier of about 11.48 times. Oromia’s profitability looked stronger than the weighted 11-bank average net profit margin on total assets of about 2.10pc to 2.12pc. Its asset-to-equity ratio was 7.39 times, lower than Abay’s 8.98 times, Coop’s 11.30 times and Hibret’s 9.28 times. Its capital-to-asset ratio of 13.52pc placed it above Abay, Coop, Hibret and Anbesa banks, though below Addis, Sidama and Amhara. That mattered because Oromia Bank’s earnings were not built on unusually high leverage.
Reported total capital to total assets came to about 13.57pc, while paid-up capital to total assets was roughly 8.05pc.
Aminu Nuru, a financial analyst based in Doha, Qatar, dubbed the year a turning point.
“This isn’t just growth," he told Fortune. "It’s a transformation. Shareholders have been rewarded with real value, and the Bank has proven its ability to deliver.”
Fee and commission income surged 92.2pc. Other operating income grew by 127pc, helped largely by foreign-exchange gains of 474 million Br. However, Aminu cautioned against reading too much into this line.
“Foreign-exchange gains are impressive, but they aren’t guaranteed,” he said. “Sustainability must remain the focus.”
Teferi acknowledged the risk.
When the currency reform was introduced, the financial year was in its first quarter, forcing the Bank to wait until the second quarter before adjusting. According to Teferi, because commitments are transferred and settled daily, many of the wider sector’s difficulties had not directly affected the Bank. Foreign currency generation was broadly flat at 328.2 million dollars, up only 0.34pc. He attributed the slowdown to the Bank’s increasing focus on foreign-currency-generating investments, including foreign direct investment projects, nongovernmental organisations, and other foreign-currency-linked activities that tied up Birr liquidity during the year, limiting loan expansion while still supporting profitability.
“We know last year’s performance isn’t repeatable,” he said. “That is why we have diversified our income portfolio this year.”
However, interest earnings still led the Bank, but less narrowly dependent on them than a year earlier.
Interest income from loans and advances reached 8.20 billion Br, equal to 66.35pc of total income, down from 75.84pc. Fee and commission income grew to 3.03 billion Br, accounting for 24.51pc of total income, up from 16.63pc. Net interest income and net income from Islamic financing products after profit sharing amounted to 5.02 billion Br. Relative to gross total income of 12.36 billion Br, that was about 40.6pc, below the weighted average share of 44.62pc to 50.57pc for the 11-bank group.
The expense side remained heavy, but it improved relative to income growth. Interest expense accounted for 36.60pc of total expense. Personnel expense took 36.16pc. Other operating expenses absorbed 15.62pc. Together, personnel and other operating expenses represented 51.78pc of the expense base.
With assets of 85.46 billion Br, Oromia Bank was the sixth-largest financial institution in the 11-bank group. Its deposit base and loan book placed it in the middle tier.
Asset quality was one of the stronger features of the year, though not without warning signs. Oromia Bank posted a non-performing loan (NPL) ratio of 2.7pc, below the Bank’s internal target of three percent, under the 4.3pc peer average and below the five percent regulatory floor. The NPL ratio for Islamic financing was 1.42pc.
But provisioning moved the other way. The loan impairment charge grew to 135.7 million Br, an increase of 203pc. Relative to the gross loan and Islamic financing book of 45.38 billion Br, that charge was only about 0.30pc. Total impairment under National Bank of Ethiopia (NBE) rules was 737.8 million Br, above the 604.1 million Br impairment figure under IFRS, requiring a transfer to the regulatory risk reserve. Across peers, provision for bad loans as a share of loans ranged from 0.39pc to 0.56pc on a weighted basis. Oromia Bank’s 0.30pc was below that level, supporting the case that current credit stress was contained.
The balance sheet expanded in a deposit-led rather than credit-led way.
Deposits jumped from 56.42 billion Br to 70.94 billion Br, while loans and Islamic financing increased only from 43.71 billion Br to 45.38 billion Br. That pushed the loan-to-deposit ratio down to about 64pc from 77pc and left the loan-to-asset ratio at about 53.08pc.
Against weighted average loan-to-asset ratios of about 59.52pc to 59.62pc and loan-to-deposit ratios of about 73.36pc to 73.48pc, Oromia Bank ended the year with a conservative funding posture. The peer average showed deposit growth of roughly 33.42pc to 33.49pc against loan growth of 17.35pc to 17.40pc. Oromia Bank followed the same pattern, but more sharply. Deposits grew about 26pc while loans grew only about four percent.
The composition of deposits shifted, too. Demand deposits expanded to 38.40pc of the deposit base from 31.21pc. Savings deposits slipped to 43.48pc from 47.14pc. Fixed-time deposits fell to 18.12pc from 21.65pc. Demand funding is often cheaper and may help margins, but it is also less stable than term funding. The Bank’s liquidity ratio was 27.28pc at year-end, well above the 15pc minimum required by the Central Bank. Cash and balances with banks climbed to 21.78 billion Br from about 9.76 billion Br. Combined with a sub-64pc loan-to-deposit ratio, that pointed to a comfortable liquidity cushion.
The loan book remained diversified across several sectors, but still concentrated in a relatively small group of activities. Domestic trade and services accounted for 17.98pc of the portfolio, industry 16.86pc, imports 16.79pc, construction 13.46pc, and exports 13.41pc. Together, those five categories made up about 78.5pc of the loan and Islamic financing book. However, export lending contracted 23.79pc, even as construction and transport exposures expanded strongly.
Teferi acknowledged the gap in export-oriented financing, but insisted that export lending often carried risks beyond banks’ control. He pointed to a warning from the Coffee & Tea Authority urging exporters to sell stock quickly amid expectations of a drop in global coffee prices.
“A loan is either repaid or fails the moment it is disbursed,” Teferi told Fortune.
Productivity improved as well. With 5,914 staff, profit after tax per employee came to about 336,000 Br, above the weighted average range of 239,135 Br for the 11-bank sample. The Bank operated 545 branches, nearly level with Abay’s 546 and behind only Cooperative Bank of Oromia’s 753. Deposits per branch were about 130.2 million Br, below the weighted average of about 150.05 million Br.
One of these branches on Africa Avenue, with 27 permanent staff, focuses on customer service and digitalisation, and mobilised about seven billion Birr in deposits during the year. According to its Manager, Fetsum Getachew, the Branch exceeded targets in foreign-currency mobilisation, drawing inflows through foreign direct investment, remittances and export-related transactions. Serving mainly corporate clients, the Branch handled around 1,000 transactions a day and operates four ATMs. Among its major customers are Moinco, Kaki Plc, Mekiya Enterprise and Seid Yasin Plc.
Fetsum plans to mobilise nine billion Birr this year.
Capital looked broadly adequate. Total capital grew by 20.6pc, faster than paid-up capital, signalling that retained earnings and reserves did much of the work in strengthening the capital base. Paid-up capital expanded to 6.9 billion Br, up by six percent. The Board approved a plan to raise paid-up capital to 25 billion Br.
Shareholders like Endashaw Kassa responded warmly. As a founding shareholder, he saw the profit as “encouraging” and strengthened his confidence in the Bank. He had bought shares not only for himself but also for his children, and the Bank’s rising profitability had reinforced his long-term trust in the institution.
The larger message from 2024/25 was that Oromia Bank became more profitable, more liquid, and more resilient than in 2023/24. Its main achievement was that income growth outpaced expense growth by a wide margin, allowing returns to recover without a comparable rise in leverage-sensitive lending. The risks in cost heaviness, sector concentration, a sharper rise in impairment charges and a more confidence-sensitive deposit mix remained.
But none of these pointed to immediate solvency or liquidity stress. For the current fiscal year, the Bank plans to broaden its income base further and target gross operating income roughly 30pc higher than the previous year.
“Last year was a turning point,” said Aminu. “The challenge now is sustaining the momentum. True success lies not only in achieving these results, but in building resilience for the years ahead.”
PUBLISHED ON
Mar 14,2026 [ VOL
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